Chinese megabanks extend profit decline as credit boom fades

Shanghai- and Shenzhen-listed banks are likely to see 6.7% increase in profit.

Chinese megabanks are poised to post single-digit profit growth for the fifth consecutive year in 2018 in line with the slowdown in the world’s second largest economy, reports South China Morning Post. 

Also read: Chinese banks struggle to strike balance between curbing risk and lending

The earnings of banks traded on the Shanghai and Shenzhen bourses are likely to rise 6.7% YoY in 2018, according to a forecast from Ping An Securities. This represents a sharp decline when banks in the Mainland reported annualised profit gains of 49% in the decade between 2003-2013 amidst the country’s debt binge.

“[T]hey mainly relied on a credit boom to achieve profit increases,” Wang Fang, chairman of Ye Lang Capital told SCMP. “The stable performance was still a result of easy credit, rather than better financial services.”

Also read: Chinese banks raise record-high $48b in Q1 to plug capital crunch

Cracks are already showing in the country’s bond and credit market as delinquencies rose to a record $17.88b (RMB119.6b) in January as credit-starved corporates failed to repay their debts amidst the liquidity crunch, according to an earlier note from DBS.